Your Eye to Indian Private Equity

Transcription

1 Four-S Private Equity Track Issue: 29 th August-4th September, 2011 Your Eye to Indian Private Equity PE activity for the week During the week ended 4 th September, 2011 there were 9 PE/VC deals worth $78.3mn compared to 10 deals worth $83.3mn in the previous week. Out of the total, 3 were growth stage deals, 3 were early stage deals, and 2 each were PIPE and project level deals The largest transaction during the week was $27.8mn investment by Jacob Ballas Capital and Kitara Capital in pharma firm Vivimid 28th August 4th September Labs Ltd. PE Investments No. of Deals Private Equity: Investment Summary during the week Investor (s) Jacob Ballas Capital, Kitara Capital Tiger Global, Canaan Partners Target Stake (%) Vivimed Labs Manufacturing Value ($mn) Sector Industry Segment Stage Chemical & Allied Pharmaceuticals MotorExchange.Com NA 13.0 Services Retail Internet Retail Growth PIPE Paracor Capital Marvel Landmarks Construction Real Estates Real Estates Growth Tenaya Capital, Charles River Ventures, Helion Ventures, Others SMS Gupshup NA 10.0 Services IT/ITeS Mobile VAS Growth Nadathur Group Amagi Media Labs NA 5.5 Services Chrys Capital NCC Ltd Construction Media and Entertainment Construction & Allied Activities Digital Media Construction & Allied Activities Ventureast Goli Vadapav NA 4.7 Services Retail Restaurants Early Early PIPE RehanYar Khan, Blume Ventures Polama.com NA 0.3 Services Misc. Services Holiday comparison site Early Motilal Oswal PE Eiffel Group-Karjat project NA NA Construction Real Estates Real Estates Project Source: Four-S PE Database Vivimed Labs gets equity funding worth Rs 1.27bn Hyderabad-based Vivimed Labs Ltd., a manufacturer & exporter of specialty chemicals and pharma products has raised Rs 1.27bn from PE funds Jacob Ballas Capital and Kitara Capital, for a 13% stake each. While Jacob Ballas has invested Rs 670mn through compulsorily convertible and cumulative preference shares (CCPS), convertible within 18 months at Rs 315 per share, Kitara Capital has bought stake worth Rs 617mn directly, subscribing to 1.85mn shares at Rs 327 each.,

2 Four-S Comment: Vivimed Labs Ltd. is in the middle of expanding its manufacturing base and is raising funds for the same. The company s expansion plans include ramping up the existing sites at Bidar (Karnataka), Bonthapally (Andhra Pradesh) besides new units at Choutuppal (Andhra Pradesh) and in an SEZ in Srikakulam (Andhra Pradesh). The total investment envisaged is pegged at about $42mn. It raised Rs 340mn ($7.5mn) through foreign currency convertible bonds (FCCBs) from IFC in June this year. And with this week s investments, the total amount raised so far totals ~$35mn. MotorExchange raises $13mn from Tiger Global, Canaan Partners Pre-owned vehicle sales portal MotorExchange.Com has raised $13mn (Rs 597mn) through third round of funding led by VC firm Tiger Global Management, in which existing investor Canaan Partners also chipped in. The funds would be utilized in expanding the network across cities in Indian and also for the brand building & hiring more resources. MotorExchange already has a strategic tie-up with 1,200 dealers pan India and plans to add another 2,800 dealers over the next 2 years. Overall, India has close to 22,000 second hand vehicle dealers in the country. Four-S Comment: MotorExchange is among a clutch of auto websites targeting primarily the used car market, though they also do lead-gen for new car models. The company earns a fee from buyers and sellers on deals transacted. The biggest company is this space is Carwale, others are ebay Motors, Autojunction.com, Autoindia.com, Carazoo.com, Gaadi.com and Zigwheels.com. It is not the first time MotorExchange has received VC funding. Earlier in December 2009, the portal raised funds from Canaan Partners and other investors and followed it up with another round of funding in January this year in which Canaan Partners and Epiphany Ventures participated. Paracor Capital acquires 8% stake in Marvel Landmarks Mumbai based Paracor Capital Advisors Pvt. Ltd has invested Rs 550mn (for 8% stake) in Pune based Marvel Landmarks Ltd., a realty firm backed by global asset managers Och-Ziff Capital Management Group. The developer will use the funding for strategic investments and completion of its ongoing projects. Four-S Comment: Back in 2007, Marvel Landmarks was set up through an entity level investment by PE firm Och-Ziff Capital Management Group and Pune-based Marvel Realtors, with the former holding 49% stake. Till now, the PE investor has infused around Rs 2.7bn into the real estate firm through a combination of both entity and project-level investments. For Paracor, the transaction is among the last major round of funding from its $125mn Madison India Real Estate Fund. Going forward, Paracor Capital plans to raise a new realty fund worth $200mn to invest in large residential projects in tier I Indian cities. SMS GupShup raises $10mn in Series-E funding Mumbai-based mobile group messaging service SMS GupShup has raised $10mn (~Rs 450mn) from a clutch of VC investors led by US based VC fund, Tenaya Capital. Existing investors including Lloyd George, New Horizons, Charles River Ventures, Helion Ventures and Globespan Capital Partners, also participated in the deal. The funds raised are to be utilized to expand into new geographies and hire more people to support the growth. Four-S Comment: Founded in 2007 SMS GhupShup has traditionally been high on VC radar and has attracted many rounds of funding. So far, including the current round, the company has raised around $47mn VC funding, amongst the highest in India. According to news reports, the deal gives the pioneer VAS firm a valuation of Rs 10bn (10x of projected revenues of FY 12). We are yet to see if these E- commerce, social media and related ventures are able to justify such high valuations. Just a month back, Snapdeal, a major player in group buying segment, raised Rs 2bn in PE funding, valuing the company at Rs 10bn.

3 Amagi Media raises Rs 250mn from Nadathur Group In a follow-on investments by Nadathur Group, an investment firm founded by Infosys Ltd co-founder N.S. Raghavan, Amagi Media Labs Pvt. Ltd, a company that facilitates geographic targeting of television advertisements, has raised Rs 250mn. The funding will support the company s plans to expand into more cities besides strengthening its sales, marketing, R&D capabilities. The company is operating in 22 cities at present and is looking at getting into 100 cities in around years time. Four-S Comment: The Company seems to have complete backing of the VC firm, as the latter has invested in all 3 rounds of funding since 2008 totaling Rs 370mn. Amagi is driven by technology and path-breaking business plan evident from the number of advertisers and mainstream channels associated with it. Today, Amagi has around 400 advertisers and 11 broadcasters as partners, including few prominent names such as Zoom TV, TV Today, UTV Software Communications Ltd and MAA TV. Chrys Capital buys additional 1.68% in NCC Ltd Delhi based ChrysCapital has bought additional 1.68% stake in Blackstone-backed EPC services firm, NCC Ltd. for around Rs 231mn. With this transaction, the overall stake held by Chrys Capital in the Hyderabad-based company is now 8.8%. Four-S Comment: Chrys Capital seems to be quite bullish on the construction firm. Only last week it had acquired 2% stake for $6.1mn also through secondary market transactions. Also, the transaction means that ChrysCapital is now the second largest institutional shareholder in the company after Blackstone Group, which so far have put around Rs 4bn in the company for 10% stake. Other notable investor in the company includes Norwegian sovereign wealth fund and Rakesh Jhunjhunwala. VenturEast invests $4.7mn GoliVadaPav VenturEast has invested a $4.7mn (~Rs 210mn) in Mumbai based GoliVadaPav, a vada pav food chain. With the funding, the retailer plans to build the brand and improve managerial capabilities, apart from taking its presence into smaller towns and cities. In addition, the firm is also planning to put in place an audit and MIS system. Four-S Comment: There is plenty of fund appetite for local snacks maker in India. The local players, post recession, have been making significant expansion. There are very few organised players in this Maharashtra's popular staple snack segment. Jumbo King has major presence in the Mumbai market. It operates 43 stores. As per the website, Goli Vadapav operates over 100 stores in 26 cities across Maharashtra, Karnataka & Tamilnadu. Polama.Com raises angel funding worth Rs 15mn A holiday travel start-up portal Polama.com has raised an angel funding worth Rs 15mn from a consortium of angel investors, led by RehanYar Khan & Blume Ventures. Both the investors are part of Mumbai based angel funding network - Mumbai Angels. However, Khan has made the investment in the personal capacity. The fund raised will be used to build operations, customer service and marketing operations. Four-S Comment: Polama.Com is founded by two classmates Dilip Panicker and MD Ramaswami and allows the customers to search and compare holiday options with least hassle. At present, the portal features more than 5,000 holiday packages from SOTC, Travel Tours, Thrillophilia, Yatra, MakeMyTrip, etc. By applying the search criteria, users can effortlessly find the holiday deals that best suit their needs. Motilal Oswal PE invests in a residential plot Motilal Oswal s realty fund has formed a joint venture with Pune-based real estate developer Eiffel Group for a 120 acre plotted development project at Karjat, near Mumbai. The investment will be done through Motilal Oswal Private Equity Advisors India Realty Excellence Fund. Four-S Comment: Tying up with a PE fund for project development is the ongoing trend, which has originated post recession as regional developers are finding it

4 extremely tough to secure funds to complete their projects. The Eiffel Group, buoyant by the success of its recent projects in other cities, has now ambitious plans to get into the Mumbai market. At present, the developer has projects worth 25mn sq. ft. across Delhi, Nagpur, Pune and Bangalore and further plans to develop 119mn sq. ft over the next 2-3 years. Fund Raising & Liquidity Events VLCC buys back CLSA stake in company Personal care and fitness chain VLCC, promoted by Vandana Luthra, has bought back 13.65% stake held by Asia-focused investment firm CLSA PE. The PE Investor, as per company sources was looking for exit route for quite some time now, which the company was unable to provide and hence had to buyback the stake. CLSA had invested $10-15mn (Rs mn) in VLCC way back in Post buyback, the Delhi-based company is now looking for a fresh round of funding worth Rs 2.5bn to fund acquisitions and expansion in the domestic and overseas markets. Reportedly, the company has already begun due diligence to acquire a personal care products company in France and an ayurvedic services company in India, both collectivley worth $70-80mn. It has also been in talks for a potential buyout in South Asia. Life insurers can invest in VC funds In a decision, which could be a landmark in domestic VC industry, the insurance regulator, IRDA has opened the doors for life companies to invest in VC funds. As per the sources, the stage owned insurance giant, LIC alone has surplus of around Rs 300bn, that could be invested in VC funds now. Until now life insurers were allowed to invest in VC funds but it was subject to the condition that the investment would be predominantly in infrastructure. IRDA has however barred insurers from investing in VC funds promoted within the group or by an investment manager, who is indirectly controlled or managed by the insurer or promoters. Also, the maximum that a life company can invest in a venture fund would be 3% of the life fund size. Private Equity and M&A News Reliance Broadcast to raise $86mn The Anil Dhirubhai Ambani Group controlled Reliance Broadcast Ltd. is in talks with several private equity and strategic investors to raise Rs 3-4bn through a fresh equity issue. The company has lined up a expansion of its radio business and has earmarked investments of Rs 2-2.5bn for the upcoming Phase-3 of FM radio auctions, and hopes to have around 100 radio stations after the auctions end. Reliance Broadcast is also in talks with several global players for a strategic tie-up in its intellectual property (IP) business and hopes to announce a deal by the end of the December quarter. The company s expansion in radio business is a consequent of favorable government support to the sector. Last month, the government raised FDI in the radio sector, which is estimated to have a market size of Rs 12bn, to 26% from 20% and green lighted an auction of more spectrums for radio to raise Rs 17.33bn. DLF in talks with IDFC to sell its Noida IT park stake DLF Ltd. is in talks with financial services major IDFC Ltd. to sell its entire 70% stake in DLF IT Park, Noida, for around Rs 9.5bn. The deal, if goes through would give IDFC the full control over the IT project because the other stakeholder in DLF IT Park, the 3C Company has already decided to sell out to IDFC Ltd. For DLF, the move is part of the company s strategy to exit non-core areas and reduce debt. The DLF IT Park in Noida has a total of 1.3mn sq ft space with Computer Sciences Corporation as the marquee tenant. The building is yet to reach full occupancy.

5 Fabindia to raise Rs 2bn in PE funding Ethnic wear chain Fabindia Ld. is looking to sell strategic stake to private equity players to raise around Rs 2bn, besides investors which could buy 8% stake held by VC investor, Wolfensohn Capital Partners to give them the exit route. As per company sources, few major PE players including Bain Capital, Temasek, Carlyle, Everstone Capital, New Silk Route, Sequoia, KKR and PremjiInvest have evinced interest and Fabindia will shortlist 4-5 firms to initiate further discussions. The Pioneer retail chain is expected to use the proceeds to fund domestic expansion. The company plans to open around 300 small-format stores in tier-iii cities such as Karnal, Vellore, Rishikesh and Rudrapur. The VC investor, Wolfensohn Capital Partners, owned by former World Bank President James Wolfensohn, had acquired about 8% stake in Fabindia for nearly Rs 500mn in 2007 Insecticides India to raise Rs 700mn Specialty chemical maker, Insecticides India Ltd. plans to raise about Rs 700mn through QIP or private equity route for its proposed capacity expansion programme, which includes setting up a new plant in Rajasthan. The company is aiming at re-vamping its formulations production capacity to 5,00,000 tonnes per annum from the current 3,50,000 tonnes, while its technicals (basic chemicals) production capacity would be increased to 22,000 tonnes from 12,000 tonnes at present. The company has a pan-india presence with Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu contributing ~40% to the company's turnover. Nova Medical Centers to invest Rs 750mn Nova Medical Centers, India s first multi-specialty standalone Ambulatory Surgery Group has proposed an investment of Rs 750mn to set up 5 such centers across India. At present the ambulatory surgery major currently has six centers: 2 each at Mumbai, New Delhi and 2 in Bangalore. The company requires additional Rs 150mn for each centre and funds would be raised through private equity and internal accruals. These centers would come up at Hyderabad, Ahmedabad, Chennai and one each at New Delhi and Mumbai. IPO, Other offerings Govt. to time-line the $2.6bn ONGC follow-on issue The Central government is set to unveil the schedule for a mega follow-on offering worth $2.6bn by state-run explorer ONGC, sometime next week. The oil & exploration services major, was all scheduled for a issue last year, before it was postponed several times because of turmoil in global markets and lingering concern over government fuel subsidies. The government, at present, owns 74.14% of ONGC and plans to sell a 5% stake. This is a part of broader proposal to raise about $9bn through share sales in public sector firms to help plug the government's fiscal gap and generate funds for schemes for the poor. Inkel plans Rs 1bn rights issue Infrastructure Kerala Ltd. (Inkel), a PPP initiative formed by the governmetn of Kerala with the objective of promoting infrastructure development in the state, will be issuing 100,000 equity shares of Rs 10,000 each in the ratio of 1:1 on rights basis to its existing shareholders to mobilise Rs 1bn. The funds raised would be utilised for company s expansion plans in the near future, which is expected to cost around Rs 10bn. The projects on hand include Rs 300mn standard design modules numbering 40 units at Angamali, pre-engineered factory buildings at Malappuram and a container freight station at Vallarpadam. The company is also implementing 2 PURA ( (provision of urban amenities in rural areas) projects at Thalikulam in Trichur district and Tirurangadi in Malappuram district with a bouquet of water supply, roads, skill training and other schemes.

6 Executive Tracking KKR appoints DS Brar as Senior Advisor The global buyout major KKR with $61.9bn under management, has appointed former Ranbaxy Laboratories CEO DS Brar as a senior advisor. In his new role, Mr. Brar will look after KKR s Asia portfolio and will provide guidance & input on the operations of portfolio companies. Brar has formerly served as a director of the RBI during and was also a member of the Inspection and Audit Sub-Committee, Central Board of Directors (RBI). However, he had the major corporate exposure with Ranbaxy Laboratories Ltd, and held CEO s position in In 2004, Brar also co-promoted a contract research firm, along with Hyderabad-based GVK group. GVK Biosciences provides discovery & development services to global life sciences companies and is backed by Sequoia Capital India. M&A Activities During the week ended 4 th September, 2011, there was just 1 M&A deal worth $74.1mn. In the lone M&A transaction, Singapore based Olum International Ltd., a suppliar of agri and food commodities acquired Hemarus Industries Ltd., a Hyderabad based sugar manufacturer for $74.1mn. M&A Activity: Summary during the week Acquirer Target Target business Stake (%) Deal value ($ mn) Olum International Hemarus Industries Manufacturing -Sugar NA 74.1 Source: Four-S Database, Acquisition price is in $mn

7 Stock Market Updates Key Domestic Indices Indian Market Movements 52 Week Index 26-Aug-11 2-Sep-11 Change (%) High Low BSE Sensex 15, , % 21, , S&P CNX Nifty 4, , % 6, , CNX Nifty Junior 9, , % 13, , Nifty Mid Cap 50 2, , % 3, , CNX IT 5, , % 7, , Bank Nifty 8, , % 13, , CNX Infrastructure 2, , % 3, , CNX Realty % Source: BSE, NSE Key Global Indices Source: Yahoo finance, Google finance

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